Eircom mulls all options to avoid covenant breach

Tue Aug 31, 2010 4:01am EDT

LONDON Aug 31 (Reuters) - Struggling Irish telecoms group eircom is considering raising equity as well as renegotiating with its lenders to avoid breaching its loan covenants, its finance chief said on Tuesday.

Eircom, which is majority-owned by Singapore Technologies Telemedia (a unit of Temasek [TEM.UL]), is restructuring to manage a legacy fixed-line business in long-term decline and has slashed staff costs by 25 percent in the last two years.

The company said it was at risk of breaching its loan covenants over the next 12 to 18 months. Eircom's debt was 3.18 billion euros ($4 billion) at June 30, or 5.6 times earnings before interest, tax, depreciation and amortisation (EBITDA).

"We are considering all options," Chief Financial Officer Peter Cross told journalists on a conference call. "We can't at this stage predict the outcome or the timing of the outcome."

Eircom's revenue for the quarter to end-June fell 8.1 percent to 440 million euros, but the company cut costs by 12.4 percent to produce flat EBITDA of 172 million.

The company said it planned to cut a further 90 million euros from its labour costs in the next two years. It has axed more than 1,500 jobs so far and currently has about 6,300 staff.

(Reporting by Georgina Prodhan; Editing by David Holmes)

($1=.7911 Euro)

((georgina.prodhan@thomsonreuters.com; +4420 7542 7954; Reuters Messaging georgina.prodhan@thomsonreuters.com@reuters.net)) Keywords: EIRCOM/COVENANTS

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